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The lower the PEG ratio, the more likely the stock is undervalued given its current earnings growth. A general rule is that a PEG ratio below 1 is a good buy.
Growth rates used to calculate PEG ratios will affect the accuracy. If historical growth rates are used but future growth rates are expected to be very different, this will skew the reliability of the PEG ratio. PEG ratios may be calculated on expected future growth rates instead of past performance. The terms “forward PEG” and “trailing PEG” are used to distinguish the two. We always use forward PEG ratios, and almost always buy only stocks with a PEG ratio of 1 or under.
We use a measurement of existing shorts to analyze the desirability of a given stock. The more shorts there are, the more likely that stock is currently overvalued.
For example, you buy a stock at $100. The stock falls to a price of $87.49 (which is right below the 12.5% trailing stop level we use as a benchmark). The trailing stop would kick in and automatically sell the stock at $87.49, preventing further loss in that stock. We would keep those proceeds in cash until we decide to buy something else with that cash.
We use trailing stops for certain stocks to take emotion out of sell decisions, and allow us to minimize downside risk.
Puts are another way we protect against downside risk. If the price of an asset depreciates below the value of the put, then the owner has the right to sell the asset – thus the owner can guarantee that they will receive the strike price dictated in the put option even if the asset declines well below that value.
Our Investment Performance
Spectacular Performance in a Matter of Months
Our returns since inception date of June 14, 2016 to September 30, 2017, were 26.24%.
Our Beta and Our Methodology
Our methodology is geared to create a portfolio with less risk at any given time than the overall S&P 500.
We Aren’t Afraid to Have a Cash Position
We aren’t afraid to sell our positions when there’s profits to make, plus our covered calls with varying expiration periods and premiums influx additional income.
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When you subscribe to our Stock Picks Alert, we’ll give you the full play-by-play. Namely, we’ll tell you exactly how we are investing in the positions listed here.